Time to skip a turn with buying land?

If farming were a game that comes in a box, some Iowa fields would be the equivalent of Monopoly’s Boardwalk. Just this fall, land near Cedar Rapids with a corn suitability rating of 83 out of a potential 100 brought $18,000 an acre.

It missed the record $21,900-an-acre sale in the northwest part of the state in October 2012. Both prices are out of the ordinary. USDA’s most recent cropland average, from early summer, puts Iowa land at $8,600 an acre – behind only Arizona and top-ranked California, with a $10,190 average.

Even that $8,600 value makes paper millionaires of any part-time farmer lucky enough to own 116 acres of mediocre land. Iowa land appreciated at almost 18% last year, according to USDA. The rest of the Corn Belt was only slightly behind, with similar double-digit growth and with Illinois and Indiana land prices above $7,000. All these averages understate top land values by a lot, as any farmer in the “I” states will tell you.

Several years of this giddy, double-digit ride also make most of us a little nervous, prompting fears of a bubble.

Economist Mike Duffy doesn’t see one.

“We haven’t really had that irrational exuberance. It’s been exuberance fueled by record income,” he says. Income shared by nearly everyone. The bottom third of Iowa Farm Business Association members usually don’t report a profit. They did in 1973, 2011, and 2012.

Few people know the Iowa land market better than this veteran Iowa State University economist. He remembers the painful ag land price collapse of the 1980s, when he worked to help farm families hold livelihoods together.

Duffy’s statistical reach goes far. “I have rent and value data back into the 1920s,” he says. He goes to auctions and follows sales. Each May, he helps run a land valuation conference attended by real estate brokers. Duffy puts together a land value survey that has been going since 1941. This year’s results are out next month.

What does he see now? In May, a survey of land experts at the valuation conference forecasts 14% higher values in the year ending last month.

“Most of that increase has already occurred,” Duffy says. “It’s kind of a precarious market, kind of teetering.”

That view is widely shared. The Federal Reserve Bank of Chicago’s most recent land value survey showed no gain in the second quarter of this year, with values slipping some in Illinois and Michigan. The Federal Reserve Bank of Kansas City’s survey this summer says, “While most bankers expected farmland values to remain at current levels, an increasing number of respondents felt that farmland values may have peaked.”

Illinois farmland prices increased only 2.5% to 3% in the first half of 2013, says a survey in that state.